Question

The management of Carla Vista Inc. asks for your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2025, the accounting records show the following data. They use the periodic inventory system. Inventory, January 1 (14,500 units): $43,500 Cost of 123,000 units purchased: $418,700 Selling price of 95,000 units sold: $727,000 Operating expenses: $123,000 Units purchased consisted of: - 35,000 units at $3.20 on May 10 - 63,000 units at $3.40 on August 15 - 25,000 units at $3.70 on November 20 Income taxes are 26%. (a) Prepare comparative condensed income statements for 2025 under FIFO and LIFO. Carla Vista Inc Condensed Income Statements For the Year Ended December 31, 2025 FIFO LIFO Sales Revenue $727,000 $727,000 Cost of Goods Sold Beginning inventory $43,500 $43,500 Cost of Goods Purchased $418,700 $418,700 Cost of Goods Available for Sale $462,200 $462,200 Less: Ending Inventory $306,700 $155,500 Cost of Goods Sold $155,500 $306,700 Gross Profit/(Loss) $571,500 $420,300 Operating Expenses $123,000 $123,000 Income before Income Taxes $448,500 $297,300 Income Tax Expense $116,610 $77,298 Net Income/(Loss) $331,890 $220,002 

          The management of Carla Vista Inc. asks for your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2025, the accounting records show the following data. They use the periodic inventory system.

Inventory, January 1 (14,500 units): $43,500
Cost of 123,000 units purchased: $418,700
Selling price of 95,000 units sold: $727,000
Operating expenses: $123,000

Units purchased consisted of:
- 35,000 units at $3.20 on May 10
- 63,000 units at $3.40 on August 15
- 25,000 units at $3.70 on November 20

Income taxes are 26%.

(a) Prepare comparative condensed income statements for 2025 under FIFO and LIFO.

Carla Vista Inc
Condensed Income Statements
For the Year Ended December 31, 2025

FIFO
LIFO
Sales Revenue
$727,000
$727,000
Cost of Goods Sold
Beginning inventory
$43,500
$43,500
Cost of Goods Purchased
$418,700
$418,700
Cost of Goods Available for Sale
$462,200
$462,200
Less: Ending Inventory
$306,700
$155,500
Cost of Goods Sold
$155,500
$306,700
Gross Profit/(Loss)
$571,500
$420,300
Operating Expenses
$123,000
$123,000
Income before Income Taxes
$448,500
$297,300
Income Tax Expense
$116,610
$77,298
Net Income/(Loss)
$331,890
$220,002
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the management of carla vista incasks your help in determining the comparative effects of the fifo and lifo inventory cost flow methodsfor 2025the accounting records show these datathey use 11838

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Horngren’s Cost Accounting
Horngren’s Cost Accounting
Srikant M. Datar, Madhav V. Rajan 16th Edition
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The management of Carla Vista Inc. asks for your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2025, the accounting records show the following data. They use the periodic inventory system. Inventory, January 1 (14,500 units): $43,500 Cost of 123,000 units purchased: $418,700 Selling price of 95,000 units sold: $727,000 Operating expenses: $123,000 Units purchased consisted of: - 35,000 units at $3.20 on May 10 - 63,000 units at $3.40 on August 15 - 25,000 units at $3.70 on November 20 Income taxes are 26%. (a) Prepare comparative condensed income statements for 2025 under FIFO and LIFO. Carla Vista Inc Condensed Income Statements For the Year Ended December 31, 2025 FIFO LIFO Sales Revenue $727,000 $727,000 Cost of Goods Sold Beginning inventory $43,500 $43,500 Cost of Goods Purchased $418,700 $418,700 Cost of Goods Available for Sale $462,200 $462,200 Less: Ending Inventory $306,700 $155,500 Cost of Goods Sold $155,500 $306,700 Gross Profit/(Loss) $571,500 $420,300 Operating Expenses $123,000 $123,000 Income before Income Taxes $448,500 $297,300 Income Tax Expense $116,610 $77,298 Net Income/(Loss) $331,890 $220,002
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Transcript

-
0:00 Hello everyone.
00:01 So the question says that prepare comparative condensed income statements for 2022 under fifo and lefo.
00:09 So condensed income statement for the year ended december 31st 2022.
00:43 One column will be for fifo and the other one will be for lifo.
00:51 So firstly we'll take sales revenue that is given to us as $750 for both then we'll calculate cost of goods sold in this firstly we'll take beginning inventory that is $35 ,000 for fifo as well as for lifo next we'll take purchases that is $468 ,000 $500 for both.
02:04 Now with this we can calculate our cost of goods available for sale.
02:20 How we'll calculate this? so we'll take beginning inventory plus purchase.
02:29 So we get $503 ,500 in both.
02:40 Now coming to next that is we'll deduct ending inventory.
02:52 Now, for ending inventory we'll make a working note over here so firstly we'll calculate ending inventory that is 10 ,000 plus 120 ,000 minus 98 ,000 that gives us 32 ,000.
03:27 Now cost of ending inventory in fifo is equals to 25 ,000 units purchase on november 20 plus 7 ,000 units on august 15 because first in first out so we get 25 ,000 plus 4 .20 plus 7 ,000 sorry over there we'll multiply it by 4 .20 and 7 ,000 multiplied by 3 .90.
04:40 This gives us 132 ,300.
04:47 Similarly talking about cost of ending inventory in leifo.
05:09 So it will be 22 ,000 units purchased on may 10 plus 10 ,000 units from beginning inventory because last in first out so it will be 22 ,000 multiplied by 3 .70 dollars plus 35 ,000 this gives 116 ,400 dollars...
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